Param Silvapulle

The relationship between spot and futures prices: Evidence from the crude oil market

This article examines the relationship between the spot and futures prices of WTI crude oil using a sample of daily data. Linear causality testing reveals that futures prices lead spot prices, but nonlinear causality testing reveals a bidirectional effect. This result suggests that both spot and futures markets react simultaneously to new information.

Testing for linear and nonlinear granger causality in the stock price-volume relation: Korean evidence

In this paper, linear and non-linear Granger causality tests are used to examine the dynamic relationship between daily Korean stock returns and trading volume. We find evidence of significant bidirectional linear and non-linear causality between these two series. ARCH-type models are used to examine whether the non-linear causal relations can be explained by stock returns and volume serving as proxies for information flow in the stochastic process generating volume and stock returns respectively.

The price-volume relationship in the crude oil futures market Some results based on linear and nonlinear causality testing

Abstract This article presents some evidence for the presence of a causal relationship between price and volume in the crude oil futures market. The results of linear causality testing reveal the presence of causality running from volume to price but not vice versa. While the results of testing for nonlinear causality are inconsistent, most of the evidence shows that causality runs in both directions. In general, there is evidence for the sequential information arrival hypothesis and the noise trading model, but not for market efficiency. There is also some evidence for the presence of a maturity or a liquidity effect. Finally, there is some variation in the results, depending on the sample period.

Testing for Temporal Asymmetry in the Price-Volume Relationship

This paper presents some evidence for the presence of temporal asymmetry in the price-volume relationship in the crude oil futures market. By using threshold models we show that there is bidirectional causality between volume and prices, whereas the conventional model that assumes symmetry can only detect unidirectional causality. The results also show that the price-volume relationship is asymmetric, in the sense that negative price and volume changes have stronger effects (on each other) than positive changes. Some explanations for asymmetry in the price-volume relationship are suggested.

Does the Fisher Effect Apply in Australia

The Fisher hypothesis claims that changes in the expected inflation rate will be fully reflected in nominal interest rates, and hence that real interest rates will remain constant over time. Evidence with Australian data from 1965 to 1990 suggests that the Fisher effect does not hold in the long-run. Analysis is performed using recently developed econometric techniques which take account of possible nonstationarity in the date. Attention is also given to the effects of financial market deregulation on interest rates.

Half-life estimation based on the bias-corrected bootstrap: A highest density region approach

The half-life is defined as the number of periods required for the impulse response to a unit shock to a time series to dissipate by half. It is widely used as a measure of persistence, especially in international economics to quantify the degree of mean-reversion of the deviation from an international parity condition. Several studies have proposed bias-corrected point and interval estimation methods. However, they have found that the confidence intervals are rather uninformative with their upper bound being either extremely large or infinite. This is largely due to the distribution of the half-life estimator being heavily skewed and multi-modal. A bias-corrected bootstrap procedure for the estimation of half-life is proposed, adopting the highest density region (HDR) approach to point and interval estimation. The Monte Carlo simulation results reveal that the bias-corrected bootstrap HDR method provides an accurate point estimator, as well as tight confidence intervals with superior coverage properties to those of its alternatives. As an application, the proposed method is employed for half-life estimation of the real exchange rates of 17 industrialized countries. The results indicate much faster rates of mean-reversion than those reported in previous studies.

Canadian monetary policy analysis using a structural VARMA model

This paper builds a structural VARMA (SVARMA) model for investigating Canadian monetary policy. Despite the support for a VARMA model for monetary policy analysis, the traditional VAR and SVAR models have predominantly been used in the literature mainly due to difficulties associated with the identification and estimation of such a model. Using the scalar component model (SCM) proposed by Athanasopoulos and Vahid (2008a), this paper first identifies a VARMA model and then constructs a SVARMA model for Canadian monetary policy. We included the SVAR model in our study for a comparison purpose. Relative to this model, the impulse responses generated by the SVARMA model appear to be consistent with those predicted by various economic theoretical models, and solves the economic puzzles found commonly in the empirical literature on monetary policy. The successful construction and implementation of the SVARMA model for Canadian monetary policy analysis along with its promising impulse responses, indicate the suitability of this framework for small open economies.

An Empirical Analysis of the Operational Losses of Australian Banks

This study provides an analysis of 54 operational loss events experienced by eight Australian banks during the period 1990–2007. The results of an event study show that the announcement of operational losses has an adverse effect on the stock price and market value of the announcing bank. Further empirical work reveals no systematic relation between losses and bank characteristics such as size and leverage. The results also show that while the frequency of an event of a certain type is independent from the underlying business line, there is an association between the loss amount and the business line. The decline in market value relative to the loss amount is found to be independent of the type of the underlying loss event.

Testing For Seasonal Stability in Unemployment Series: International Evidence

Recently, it has been shown that seasonal and business cycles are related and a similar economic mechanism is at work in producing both types of cycles (Miron 1996). Thus, an analysis of seasonal fluctuations sheds light on the nature of the business cycle. This paper uses the classical test developed by Hylleberg et al. and the LM-type tests proposed by Canova and Hansen (1995) to investigate seasonal behavior in the unemployment series of Australia, Canada, Japan, New Zealand, the US and a number of OECD countries. The main findings are that the Australian, Austrian and Canadian series are non-stationary at all seasonal frequencies, French, Japan, the NZ and the UK series are stationary at all seasonal frequencies and the USA series is stationary only at the annual frequency. The test results for other series are mixed, suggesting that further analysis is required to reach a definite conclusion. The series, except for France, Japan, New Zealand and the UK, appear to possess unstable seasonal patterns, indicating changing business cycle conditions.

Testing for a unit root in a time series with mean shifts

The study considers the ADF and KPSS tests for unit root testing in a time series characterized by a number of structural changes in its mean. Using the Monte Carlo simulation method the percentage points of the tests distributions are estimated. These two tests are biased towards non-rejection of the unit root. The bias of these tests appears to increase as the number of breaks in the series increases. The overall results in the study indicate that when a time series is subjected to a number of changes, provided the appropriate critical values are used, the unit root tests can erroneously reject the hypothesis of unit root. The tabulated critical values can be used in hypothesis testing.